NZME reports steady profit despite challenging market

NZME keeps adjusted net profit on line despite declining print ad revenue.

NZME, the New Zealand media group awaiting Commerce Commission approval to acquire Fairfax Media's local assets, reported a steady full-year adjusted net profit as challenging advertising markets were helped by a strong growth in digital revenue.

The company said its adjusted net profit was $27.8 million in calendar 2016 from $27.5 million in the previous year, while its statutory net profit was $74.5 million against $42.9 million in the previous year, impacted by tax and a gain on sale of interest in the Australian radio network. Its adjusted earnings per share were 14.2c. Trading ebitda was $71.9 million versus $71.8 million in the prior year, supported by a 6% reduction in operating costs from integration benefits.

NZME said its trading revenue declined 6% to $407 million in challenging advertising markets. After adjusting for the impact of divestments and business closures, pro forma revenue fell 4%.

Print advertising revenue comprised 33% of the revenue over the year and adjusted print revenue declined 6% to $237.7 million, after excluding the impacts of business closures and divestments.

However, after a challenging first half, the decline in print advertising revenue slowed in the second half, NZME said. The print advertising revenue decline was less than half the estimated 2016 market rate of decline and circulation revenue was stable on the year as it maintained subscriber numbers and improved yield through price increases.

The company said "radio and experiential" contributed 28% of the revenue and at $114.8 million was 4% lower on the year.

However, it achieved digital revenue growth of 24% in the year, versus market growth of 16%, largely driven by mobile and video advertising revenue. NZME's digital audience reach grew 19% over the year to exceed 2.4 million and the company now has more than 900,000 social followers.

Regarding the NZME and Fairfax merger, which remains subject to regulatory and shareholder approval, it reiterated that if the merger is approved it expects to hold a shareholder meeting to vote on the merger in early June 2017, with a view to completing the transaction by June 30, 2017. In the event it is declined, the parties will "consider their next steps" it said, noting a decision by the Commerce Commission to not approve the merger can be appealed. The decision is expected in mid-March.

The company declared a fully imputed final dividend of 6c a share, scheduled for payment on April 28. It provided no guidance for the current financial year but said it would remain focused on further growing audience reach, retaining revenue in print and making sure radio returns grow.